EC fast-tracks new draught EU budget for 2011

The European Commission has adopted today a new draft EU budget for 2011 after the failure of the conciliation procedure between the European Parliament and the Council on 15 November 2010. The new draft budget foresees €126.5 billion in payments (+ 2.9% on 2010). This morning, the President of the Commission Jose Manuel Barroso sent a letter to the Presidents of the European Parliament and of the Council on the political issues linked to the adoption of the 2011 budget.

“We worked full speed to present a solid starting point for renewed negotiations between the European Parliament and the Council,” states EU Commissioner for budget and financial programming Janusz Lewandowski. “Our target was to present this new draft budget by 1 December; but working faster enabled us to beat this deadline in order to give both arms of the budgetary authority more chance to find an agreement on next year’s budget before the end of the year.”

On 15 November, the Council and Parliament failed to reach an agreement on political issues linked to the EU budget which led to the collapse of the conciliation procedure.

These issues centered on defining modalities for inter-institutional dialogue in view of the adoption of the next Financial Framework, future sources of income (“own resources”) for the EU budget as well as the level of flexibility within the current Multiannual financial framework. The Parliament has confirmed its position on these three issues in a resolution it adopted on 25 November.

In President Barroso’s letter to President Buzek and Prime Minister Leterme, the Commission calls on Parliament and Council to develop the modalities regarding cooperation on future budgetary issues as foreseen by the Lisbon Treaty (joint work on the next Multiannual Financial Framework).

The Commission also states its intention to come up with proposals on the EU’s own resources by June 2011. Furthermore, the financing of the EU’s new tasks stemming from the Lisbon Treaty and of the EU 2020 strategy shall be examined with European added value being the cornerstone of future Commission’s proposals.

As regards flexibility within the budget, Commissioner Lewandowski adds, I am happy that the Council agreed yesterday to establish a contingency margin of up to 0.03% of the EU GNI as a last resort instrument to react to unforeseen circumstances. We welcome it as a major step forward.

The Commission will immediately send the new draft budget 2011 to the European Parliament and the Council. On that basis, the Parliament and the Council are to reach an agreement.

“It is crucial that we reach an agreement on next year’s budget by 31 December,” says Janusz Lewandowski. “All around us, new economic powers emerge while markets must see that Europe dedicates its efforts to overcome the current crisis rather than remains paralysed in purely internal debates. Despite what some say, the EU budget is not a “budget for Brussels,” the functioning of the EU institutions amounts to less than 6% of the total budget, this means that almost 95% of the budget goes to boosting Europe’s economic growth, to towns and regions, to scientists, farmers and students, to protecting our environment, tackling climate change, making our transport safer and enabling Europe to act as one on the world stage. We need a budget for 500 million Europeans! On the basis of yesterday’s developments in Council and Parliament, I am convinced that an agreement is within our reach, based on our new budget proposal.”

This is the first EU budget to be adopted under the Lisbon Treaty procedure. The treaty introduces many changes, including the fact that for the first time the Council and the Parliament are on equal footing in the adoption procedure.

The adoption procedure is in four parts: first the Commission presents the draft budget, this was done on 27 April when the Commission called for a 5.9% increase; second the Council reacts (on 12 August, the Council called for a 2.9% increase); third the Parliament reacts (on 20 October, the Parliament called for a 6% increase); fourth a 21 day conciliation procedure follows to find a compromise between the two institutions (the Conciliation Committee worked between 26 October and 15 November).

If the conciliation procedure fails, the Commission must present a new draft budget (art.314.8). The college of Commissioners empowered Commissioner Lewandowski to adopt the new draft.

If there is no agreement by 31 December 2010, from 1 January 2011 the EU would operate under the system of the “provisional twelfth.” In short, each chapter of the budget would be funded monthly by one twelfth of its 2010 budget or even less if the amount in the draft budget is lower for that chapter. This would hamper the good funtioning of the EU since any new initiative or body that did not have a budget in 2010 would not be funded by the budget, the solidarity fund and globalisation adjustment fund would be frozen, and generally speaking equal monthly budgets would prevent planning over several months.